About this Show

Squawk on the Street

News/Business. Melissa Lee, Carl Quintanilla, David Faber. Opening bell market action. New.

NETWORK

DURATION
03:01:00

RATING

SCANNED IN
San Francisco, CA, USA

SOURCE
Comcast Cable

TUNER
Channel v58

VIDEO CODEC
mpeg2video

AUDIO CODEC
ac3

PIXEL WIDTH
704

PIXEL HEIGHT
480

TOPIC FREQUENCY

Mr. Miller 33, Irs 24, Mr. George 19, Us 15, Washington 13, The Irs 11, Cincinnati 10, Europe 9, U.s. 7, America 7, Miller 6, Mr. Shulman 6, Steven Miller 5, Zuckerberg 5, S&p 4, Je 4, Facebook 4, Smith 4, Jim 4, Google 3,
Borrow a DVD
of this show
  CNBC    Squawk on the Street    News/Business. Melissa Lee, Carl Quintanilla,  
   David Faber. Opening bell market action. New.  

    May 17, 2013
    9:00 - 12:00pm EDT  

9:00am
>> no, because i saw zach johnson running around with -- and wait. do not have these things and not do it. you are looking down and a couple times you don't watch and they are good ads and effective and they scare the crap out of you. s sorry to take up so much time there. >> it is a good one. >> good message for everybody. >> "squawk on the street" is next. "squawk on the street" i'm david fab wer jim cramer and brian sullivan live on the street, and carl quintanilla is on sassignment this week. and the stocks are higher after one day of the stock markets were in the worst session. >> and the worst session in two
9:01am
weeks and not a blip. >> and what are are you thinking about it? >> well, it is one of the moments that i did not realize we were in maximum pain. >> if that is maximum pain, then things are pretty good. >> i agree. >> let's look at how things are going on over in europe as well like the map we get there. there it is. ooh, it is green! >> switzerland, the only place. finland. nokia. >> there you go. >> they will change the whole country to nokia. >> the whole country in that one stock. and the house ways and means committee on the irs scandal is getting under way. among those set to testify is steven miller who was ousted as a acting commissioner days ago and the treasury inspector general. we have more from capitol hill, and what we can expect from this important hearing? >> that is right, david. it is an important hearing and our chance to hear from steven miller who was the director of the irs who was dumped by this
9:02am
week. and also we will hear from the inspector general who wrote the report that said that the irs had been politically targeting specific tea party and other groups for specific unnecessary criticism and skepticism about the tax-exempt status. this is what russell george said. the irs used inappropriate criteria that identified for review tea party and other organizations applying for tax exempt at the status based upon their names or policy politicians instead of indications of potential political campaign intervention. this says that they were targeting groups op purpose and not comparing other liberal groups to the same scrutiny. we have not been given anned a vns copy of the texts, but we
9:03am
can expect that the members of congress are going to be extremely tough in the criticism of him and the questioning of him. one of the key questions in all of this is who exactly approved this tea party scrutiny? it is not clear from the inspector general's report, and another question that the lawmakers will be going after is when did the treasury department become aware of this problem, and when in fact did people at the white house become aware of the problem, and those are two questions that will be answered today. >> thank you, eamon. jim, any impact on the broader a markets on psychology, on the ability of washington to get anything done that they might not have been able to get done and therefore perhaps comes down the road on the fiscal -- >> well, an odd one, because i like to have a takeaway. the banks? because congress is distract and
9:04am
the banks can get off of the radar screen and feem feel that the president is distracted and what area has been impacted the worse by washington? the banks. and people say that the cloud is lifting from washington and part of it is this is what they are talking about now, and not a bizarre takeaway because the banks are the most undervalued s sector and it could happen. you read in "the new york times" yesterday that washington scrutiny is dying down and washington has to focus on something besides this. >> and for some time it appears. >> good. they can sit and fight along in the beltway and america can go along with the rest of the lives. >> i am not going the disagree with that republican or democrats. >> well, there are other parties out there, lib tearians. >> and there are other things that i could look into like the sequester is not the worst way to go about cutting. >> never a group as hot as northrup grumman and lockheed, and we were told that they would
9:05am
neuter the defense department, and the american defense cutting society. >> and we saw sales up in the public sector, and so the complete stoppage of the public spending like some sarcastically suggested is not happening. >> no, it is not happening. >> you mean to tell me they had $85 billion in fat and nobody knowing? can i take that coffee while you are on. >> will you take this one? >> i don't know whose it is. i will put it away. >> the futures are moving higher, david. >> that is funny, jim, because they are moving higher as stocks look to rebound from yesterday's decline, and the nasdaq is still on pace for the fourth consecutive week of gains. gold is falling for the second consecutive day. >> that is unbelievable. that is not talked about enough. gold has been in free fall for
9:06am
every single day as the people think that the dollar is stronger, and this is all part of the hey, listen, things are better, and yet this things goes down and it is hideous. >> you didn't get the memo. buy the defense sector and short gold. you didn't get that memo? it is over for gold. >> no, i just any that right now the stars are aligned to believe in the dollar and this is what you will get when you believe in the paper currency. >> and we had fed members talking about when the taper will begin with various opinions on how it will be done, when it will be done most importantly or if it will be done any time before. >> and bernanke is giving a commencement speech. >> where? >> tomorrow at a school called simon's rock. >> really? >> really. it is true, folks, and not sure how they got bernanke, but they did. so actually over the weekend, there are some people that i have talked to and said watch this commencement speech, it is unlikely, but now every time bernanke talks because of the
9:07am
taper talk, his words may be parsed more than they have been if that is possible. >> even if he is talking about the father's drugstore and the humble beginnings? >> going on to follow your dreams and all that stuff? >> it is a young boy made good, rig right? >> before then i thought it was south of the border. >> well, follow the dreams. >> well, i will tell you that you are absolutely right that we are in the moment that every word matters, but i will reverse myself and go the david tepper who will tell you sh, hey, the bulls want this, but they don't realize it. by the way, the banks would do so well in a taper iing way. >> and you e poipointed out thet day in terms of pain yesterday, because we have had it so well. >> well, in '87 to the peak or
9:08am
looking to the november run-up to the march 3rd runup in the nasdaq, they had no breathers whatsoever to speak of. but we are still far from where that was. we had great discussion on street signs talking about how you were making 500 nasdaq points a month during that 2000 run and here you are making 200 nasdaq a run, and i like to have apples to apples comparisons. >> fair point. >> not to mention the multiples then were, well, you could not have a multiple to earnings because so few companies had earnings. >> and it was 80% earnings and go $600 billion -- >> and cisco was the biggest company in the heyday. >> and g.e. had a multiple of 45 times i believe it was at one point. >> and so if you keep the
9:09am
perspective, because people come up with the moving averages are higher than we have seen and so many other companies are the s&p 500 high list, but you have not seen anything if you go back. >> and people are justifying why g.e. should trade at 80 times -- >> and just buy apple at ten times. >> and you can justify easily why some consider the market undervalued because the s&p 500 trail i trailing earnings is 15.5 to 16 and we are over 14 right now, but the point is that we are below the 30-year valuations for the trailings of the s&p 500, and however, and i want to throw some water on that. if you believe the denominator and if the earnings are going to come down and the multiple will instantly expect people say, yes, that is what to expect, but if the multiples come down, you will see expansion of the plan and this is what you will hear from the bears. >> you put water on it, but here is some acetylene on it. when have the bonds traded like this ten years ago?
9:10am
it is unattractive tenure. i remained -- >> well, people will put more money into the equities as a result and the correlation of multiples and it is not clear. >> well, forget about the controlling the prices, but talk about bernanke the high man being, because he is not a young man. he is not a young man, but he is not retirement -- >> well, thanks a lot, he is my age. >> he is? >> this is my point, jim, bernanke who is an extremely intelligent man has to know, this whatever else your plan is for the fed, you are driving up the asset prices a la equities which is great for me, 20 years away from retirement and if i'm 100% exwhich tquities and if it higher then, then we are all
9:11am
going to be living in caves. and he is screwing the savers -- can we say that? my dad is thinking, ten-year bond and i have to be in equities and he is nervous, so bernanke has to know that you have to give the retirees something for the money. >> it is time for the middle-class, and -- >> you know, if you are a homeowner and stock owner, you are doing well and good credit to borrow money, you have done well. >> and that is a small percentage of the people in the country who have more than $10,000 in the stock market to make a real difference. >> d average 401(k) balance is around 30,000, and that is it. >> you look at the percentage of the people who have it, and it is not a large percentage overall of the u.s. population. >> well, more and more people retire, you have to give the retirees some income aside from owning an equity which make some people like my father nervous. >> well, he should look into the
9:12am
partnerships, because that is my -- don't dismiss this. when you speak to rich people they own limited partnerships. and you want to know what the rich people do is they sit there with the kinder morgans at 5% and they will reinvest, and it is not bad. >> and another equity general motors poised to open at a new 52-week high. and g.m., they is now entering a cycle sweet spot getting traction in the european turnaround and developing an impressive china strategy. meanwhile, there is data to show that europe's car market is up for the first time since '11. >> it seems europe is bottoming out. >> yes. >> and it seems that there were 4:00 a.m. tweets that gm and the federal government getting out
9:13am
of the picture, and gm has earnings power and if europe turns around, gm is huge and they may have leapfrogged ford in the turnaround but the f-150 and they are having to put up factories to meet the demand for pickup trucks and anybody who has driven one of these, and you have driven one and i have driven a 350 and i have to tell you that you are king of the road when you have a 350. >> i want to give a shout out to my friend scott minor the guggenheim partner, and he has been right on gold, but almost everything else. he has called for a turnaround of the european equities and i'm a fan of the formula 1 and also on nbc by the way now, and i know that europe has problems,
9:14am
but i have spanish friends in the town where i live and they talk to the family and everything is that more people are working in europe than you think, but they are off of the radar and it is cash economies and the stands of the sporting events is filled and europe is still struggling dramatically, trust me, but there is money in europe and big companies like nest nestle, loreal who my wife works for, full disclosure, but people are buying food and things and things are moving in europe. slowly. but moving. >> i saw the ceo of far ragama, a and they are having a huge year. sometimes i consider you the p.t. barnum of it. >> oh, me. i thought i it was somebody e e else. >> well, i thought that you are right about europe and it is bottoming and vkg is the way to play it and the autos are coming back and we will look at the stocks and say, what were they
9:15am
doing at 30 and 14. that is where you should be. >> we will get phil lebeau from the paris show next week and he can send us bag a baguette. >> what a stock. >> and we are going to be staying on top of the capitol hear hearing of the irs scandal and the man ousted as the agency's acting commissioner is in the hot seat, and he is going to be bracing for tough questions, and i am sure he didn't get a lot of sleep last night. and facebook completes the first year as a public company. tomorrow, but today is the last trading day of the anniversary, and one analyst says that the social network should fear google, and we will tell you why. here are the futures on this beautiful friday and we are seeing, guess what, the hot air balloon market continues. put the gas in, and we will go up. more squawk on the street live
9:16am
from post nine when we return. t, making it easier to try filters and strategies... to get a list of equity options... evaluate them with our p&l calculator... and execute faster with our more intuitive trade ticket. i'm greg stevens and i helped create fidelity's options platform. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account.
9:17am
today, one year after the facebook offering fiasco, where is the giant now? go inside of the nasdaq disaster, and could it happen again? meet mark zuckerberg and those who are running the show. how has facebook changed since the ipo? facebook, one year later, the social
9:18am
retailers in the morning spotlight. jcpenny's lower because of the last quarter loss. and the consensus as the revenue sales fell in the same period.
9:19am
and the ceo says that he needs time to fix the retailer and recognizes the magnitude of the challenges that the company faces. in the meantime, nordstrom shares are down on quarterly results that were also below what analysts had been looking for. >> sobering in the jcpenney conference call, because a lot of what mike is trying to bring back is the spirit of the private label. they had this st. john's bay and it was a popular label and very easy to football, and the retail kicked around the price, and that was decimated by ron. that he is trying the bring it back, and he did point out sephora which was omen to have a store within a store and he wants to do the home store within a store, and it is cautionary call and it is hard to muster enthusiasm for a company when mike, himself, is saying that we don't know what is going to happen. >> and right, they are losing
9:20am
money, of course, and losing a loft the customers, and that is funny, because it is down 16 on a down 19. >> this is not good. it is not good. >> and so your start with 100 minus 19% and that minus 16% or 16% minus 19% is not good. you are making a lower base though. >> i have here in my hand the document that the says by terry lundgr lundgren's basis. >> well, they are losing customers and lost 17% of customer base. >> well, women didn't like it. >> and where are they going? >> well, kohl's? macy's? >> you have to look at the mall, it is a physical issue, where do you go? macy's have sales that people like, and jcpenney had sales that were eye popping, because it cost so little to make the st. john's bay but i am concerned about the long-term health. >> i tweeted it out last night
9:21am
that $16 million management transition costs taken in the first quarter, okay. that is about $1 million a month for a management team that was in place. >> well, my parents both worked at the retail sales and it is horrifying what happened here. >> and here these people are getting millions for failing. >> it was horrible and a classic case of tremendous mismanagement. again, ullman is loved, because no one ever said a bad word about ullman other than ron johnson. >> but if he was a big winner, johnson wouldn't have come in the first place. >> well, it is just that ullman is a congenial fellow who you are wanting to root for and i have rooted for him, but i don't see the future here. >> and ron johnson was the jamarcus russell of ceos. >> and we will have cramer's mad dash. i am looking forward to that because i have no idea what you are going to mad dash about after this. no, thank you. we know you're always looking for the best fill price.
9:22am
and walk limit automatically tries to find it for you. just set your start and end price. and let it do its thing. wow, more fan mail. my uncle wanted to say thanks for idea hub. he loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. [ male announcer ] open an account and get a $150 amazon.com gift card. call 1-888-280-0149 now. optionsxpress by charles schwab.
9:23am
otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪
9:24am
it is six minutes from the opening bell and time for cramer's "mad dash" and time for table tableau. >> well, it is disappointing to a incredible degree, because the conference call was unbelievable. they have a networking business and a service business with i.t., and infrastructure and security business and a p.c. business and they talk lovingly about the first three which i
9:25am
add up in eyeballs to $3.2 billion and the p.c. business which is down, and very unsustainable and very j krshgs pc pen >> isi has a note on it, they believe that the pcs have much further to go in the long-term decline before leveling out. >> well sh, carl icahn is a sma man and you don't want to leave too quickly, because it is two years away before a collapse in pc trend continues. >> he is the one to put it up, and if you can use a stub to have value it to, you might take it or might not, but if you vote down the current deal, you in no-man's-land before the new board and question marks, and jim, i want to find out -- >> go ahead. >> what is going on "mad"
9:26am
tonight? >> well, i have a speculation that i think that could be yes, almost a double between here and next year. you have to tune in. >> woo, look at that. like it. >> holy cow, it is like the westside highway. people are liking that. >> we have a new ipo coming up that i cannot pronounce this for some reason. >> i like tableau, and it is french. you want to the meet ghetto. >> we have the opening bell coming up next. today, one year after the facebook offering fiasco, where is the social media giant now? is the socia♪ media giant now?
9:27am
9:28am
[ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves...
9:29am
futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade. you see "squawk on the street" live from the financial capital of the world where the opening bell is set to ring in. in about a minute and a half here or so. and we will have a big ipo here and we will take the u.s. hearing so we may not get to the opening of tableau. >> and you may say how can jim cramer slag us, but this is a hot company, and very hot company and they point out the kinds of data and customer
9:30am
finance and supply chains and supply customers -- >> 8.2 million shares and a lot of the hedge funds are complaining this morning saying they have virtually no allocation, and they wanted it. you can see them ringing the opening bell. t tableau and as we said, this is an interactive maker of softw e software. you put the data in, and you will get a graph. >> this is a hot space, because you have numbers and don't understand where you are going, and this is a nice pie chart or bar chart, this is who is buying and what is going on. >> and quick technologies is another one, and this is a powerful concept in the cloud. by the way, you know, just so you know, this is what dell was trying to do when they do these special proprietary businesses, they wanted to be tableau.
9:31am
>> and don't forget the marketing software platforms that the celebrated over at the nasdaq. >> and these are so premium, because people are thirsty for stocks other than google. >> well, goldman is leading the allocations and talked to a couple of funds this morning and they got 2,000 shares, and this is going to be a big opening, and they were complaining. they were complaining and apparently management said they didn't want hedge funds in it. >> that is true, but there is big dogs which is code for big account, and a big dog, and right, i know, and there are a lot of big mutual funds sitting on this, and just so that the people at home, they will buy a quarter of it and get a quarter of a starter position, and then come in on the after market at 3/4 which is why you see the pop, because whether it is tableau or the deal managers don't want flippers. they hate flippers and hedge funds are notorious flippers. >> and it is interesting that we talked about what might be the
9:32am
significant increase in another ipo and it was a year ago, social networking -- >> yeah, justin timberlake and who was the other guy -- >> friendster. when is the friendster ipo? >> yes, facebook one year ago, and we want to go to the hois ways and means. >> and of course, it is under l undervalue and i own it in my charitable trust, and i like it. >> and again, when were you made aware of that? >> again, sir, i won't give you a perfect time line, but approximately the time it was public is when i became aware of it and so you would know the time line. >> did you inform anyone else of that? >> i believe the service info informed at that time, yes. >> in each of the instances that
9:33am
i have asked you about, did you come forward and inform the congress? >> i don't believe so unless it came up in conversation or testimony. and may i suggest on that, mr. camp campos, too -- >> this is the national organization of propublica. >> well, they can speak to what they found, mr. george can refer to that, and we made the referrals and what they found i believe is that the disclosures were inadvertent and that there has been discipline in one of those cases for somebody not following procedures, but i will obviously let mr. george speak to that. >> but you never inform ed the congress of any of these things that you are aware of? these items that i have asked you about? >> they were in the press, sir. >> all right. >> well, obviously, the irs mission statement says that the role of the irs is to help
9:34am
america's taxpayers understand and meet their tax responsibilities and enforce the law with integrity and in fairness to all, and i think that clearly the mission is not being met. mr. george, i guess i would just have one last question, mr. miller, when asked the truth, and you know the truth and you have a legal responsibility to inform others of the truth, but you don't share that truth, what is that called? >> i always answer questions truthfully, mr. camp. >> all right. mr. george, were you ever made aware of the alleged disclosure of the confidential tax structure of a private company? >> we have been made aware of it. >> you personally? >> two, one specific or in general? >> you, specific. >> to a specific company or in general, sir?
9:35am
>> specific company, but a disclosure of taxpayer, the confidential tax structure as you know any information is considered confidential and particularly the tax structure of a private company, and were you made aware of that public disclosure? >> we are made aware of public disclosure of information protected by title 26 section 103, yes. >> are you aware of the instance i am referring to? >> i am, yes. >> when were you made aware of that? >> i don't have the exact date, sir. >> how were you made aware of that? >> i believe it came through my office of investigations or put through a hotline that i'm not completely certain of. >> so, you don't believe that you were, you learned of it from another, from an irs employee? >> i generally do not, below the commission or the deputy commissioner level interact with
9:36am
the employee, because it goes through a chain of command. >> that includes the commissioner, so no irs employee informed you of this information? >> most likely it would have come from one of my principle deputies and they received that information from someone and not at the commissioner level, but maybe the deputy commissioner level. >> but you are not aware of and you cannot tell us? >> at this time i cannot, sir. >> were you made aware of a alleged confidential donor list for the national organization for marriage? >> i both read in the newspapers allegations to that effect, but i have to make it clear, mr. chairman, that the internal revenue code has very strict rules as it relates to the way that confidential taxpayer information is revealed and we at tigda are the ones to respond
9:37am
and i have to be sensitive to how i respond. >> did you respond to the information? >> a review has been taken. >> it is ongoing? >> i will have to confer with my colleague, if you'll give me a moment. is it ongoing, yes or no. it is not ongoing. >> there are new allegations of irs misconduct and the targeting, and more work needs to be done, and is your office continuing to investigate the allegations? h. >> yes, sir. >> thank you. i want to move over to mr. levin. >> i want to go on to other things, but the incidents that mr. camp is talking about the disclosure, what years were
9:38am
those, mr. miller? >> again, sir, i apologize for not having the date at hand. they have been a couple of years now i believe. >> a couple of years. who is the commissioner at that time? >> i believe it was mr. shulman. >> who appointed mr. shulman? >> mr. bush. >> let me start with two key issues. there's no question about the inappropriate criteria, and i wanted to focus on that, but let me first act right up front if i might, mr. russell, during the course of your audit, were you allowed access to everyone that you requested to interview? >> to my knowledge we were not denied access to anyone. >> did you interview employees
9:39am
in both cincinnati and in d.c.? >> correct, yes, we did, sir. >> on page 7, mr. george of the i.g. report it states and i quote, all of these individuals stated that the criteria were not influenced by any individual organization outside of the irs. is that correct? >> that is the information that we received. correct, sir. >> did you find any evidence of political motivation in the selection of the tax exemption applications? >> we did not, sir. >> mr. miller, during your review of this matter, you indicated when you started it, did you find any evidence of political motivation on the part of employees involved in processing the applications at issue? >> we did not, sir. >> if we could put on the screen the organizational chart. is that possible, from the
9:40am
report? someone going to do that? it is called high-level organizational report. mr. miller, in 2010, the inappropriate criteria that singled out applications for tax exempt status by name was developed by what office? >> it would be developed by an office that actually is not on here, but it is on page 2 of this on the lowest level jurisdiction. >> and where are those employees located? >> for the most part, they are located in cincinnati, and there is about 140 folks who do this sort of work in cincinnati, and there are a handful of people around the country who report into cincinnati as well. >> in 2011, the report finds that the director of exempt
9:41am
organizations eo on this chart and afraid it is not on the screen yet, but as mrs. learner learned of the criteria order change which was changed in 2011 to no longer refer to the name tea party or patriot. mr. george, is that correct? >> that is correct, sir. >> mr. miller, as then deputy, were you aware of the problem with the criteria in june or july of 2011? >> i was not, sir. >> in january of 2012 the criteria were changed again to an, i quote, organizations involved in limiting or expanding government, educating on the constitution and the bill of rights and social, economic reform movement. the i.g.'s report indicates that
9:42am
the change was again made in the cincinnati determinations office without executive approval. mr. george, is that correct? >> that is correct, sir. >> it was changed without executive approval? >> that is our understand iing. >> the may 2012 criteria are in place today states that organizations with an indicators of significant amounts of political campaign intervention, and the ig report states that in quotes, it more clearly focuses on the activities permitted under the treasury regulations. mr. george, is that correct? >> that is correct, sir. >> i have no further, and my time is up. >> at this time i will yield to the chairman of the oversight committee, senator bustamonte.
9:43am
>> we had a hearing in this very room when i asked mr. shulman about reports that the irs was target i targeting specific groups, and this is his response and do we have the video? >> there is no targeting and this is the kind of back and forth that happens when people apply for the 501c status. >> this is march 22nd, 2012, and knowing what you know now, was mr. shulman's response truthful? >> it was incorrect, but whether it was untruth or not, look, when you talk about targeting, and we should get into this dr. bustamany, because targeting is a pejorative term, and i am not
9:44am
defending the list, but what happened here and i would like to go through the application process. what happened here is that someone saw some tea party cases coming through and they were ak no -- acknowledging that they were going to be politicized, and there was a lot of sensitive issues of the 501cs and so they decided to centralize the cases, and the way they did it is troublesome, but the way is not. we are not targeting these people in that sense, but what we are doing is to making sure that we bring them in and have people -- >> well, let me ask you this, you said incorrect, but not untruthful. what does that mean? was he not informed of this process? >> to my knowledge i don't believe he knew at the time. >> because in march, you sent technical adviser to cincinnati and press reports and letters
9:45am
from chairman camp and myself dating back to 2011, and so, clearly, it was congressional interest in this issue, and press reports, and you are saying that he was not informed of this. >> so, let's divide the world into a couple of pieces here, and there is the list that was used and the processing of the cases. at that time we were aware that there were issues with the processing of the cases, but not aware of the list. i asked in late march after the hearing i believe for us to go in and to take a look, because i thought that there were problems in processing the cases, and they came back with both pieces. yes, problems with the processing of the cases and problems with the listing. >> so you were given a complete briefing of this improper selection based on political beliefs and this is may 3rd of 2012, is that correct? >> well, i would recharacterize your question, sir. i was informed of what we had
9:46am
found out to date, tigda was in there at the time, and i was told that there was a use of the list. the list seemed obnoxious to us, as it does to you, and we were going the take actions on that, and yes, that was in may. >> and you say that it was not targeting, but why was only one side of the political spectrum singled out in this? >> so i think that what happened was, look, they get 70,000 applications in there for 150 or 200 people to do. they triaged those. people look at them, and they send them ooeither through the system, because they are okay, into a mix of folks so that they can get technically fixed up and some go for substantive questions. politic s politics is an area where we always ask more questions, and it is our obligation under law to do so as mr. george said 501c
9:47am
can't do it, and a level 4 can do it. >> we are trying to get to the heart of this matter and in the briefing of 2012 in may, you were told that they were targeted if they contain terms like tea party or we the people or many of the terms that chairman camp referenced and knowing the practices and knowing that you sent letters to congress acknowledging our investigation into the allegations, but consistently omitted that such discriminatory practices that are alleged were actually in fact taking place. why did you mislead congress and the american people on this? >> mr. chairman, i did not mislead congress or the american people. i answered the questions as they were asked. >> why didn't you tell us about the terms? >> time has expired.
9:48am
mr. crowley is recognized. >> thank you, mr. chairman. mr. george, you are the inspector general at the treasury, correct? >> well, actually three inspectors general within the department of treasury and i'm the inspector general exclusively focused over the irs. >> okay. and you were appointed by then president bush, is that correct? >> that is correct. >> and you state in your report that no one outside of the irs was involved in this political targeting of not or the proffor organizationings, is that true? >> per this order, yes, sir. >> you found that ono other groups were targeted, is that correct? as of now, yes. >> and mr. george, who is the last presidentially appointed irs commissioner? >> douglas shulman. >> douglas shulman, correct. >> and then appointed by then president george w. bush, is that correct?
9:49am
>> that is correct, sir. >> and mr. shulman was commissioner when these improper and outrageous activities that both sides of the isaisle recognize as being outrageous and improper when they occurred, is that correct? >> yes. >> and prior to commissioner shulman, the last political head or political appointee of the irs was mr. mark everson, is that correct? >> that is correct, sir. >> he was also appointed by president george w. bush? >> yes, i believe so. >> and during his tenure and while it is believed that groups like the naacp, progressive churches in opposition to the war in iraq and environmental groups were targeted be by the irs. mr. miller, while you were appointed at the commissioner at the irs, you are not a career -- you are a -- sorry, you are a career civil servant, is that not the case? >> it is, sir.
9:50am
>> you were not a political appointee. >> i am not a political appointee. >> what i'm trying to point out and basically to debunct is the notion or the idea of the political statements and i believe nonfactual statements by chairman camp to link these scandals to the white house or solely the targeting of conservative groups. i was the person last week who asked the question of ms. learner as to whether or not the irs were investigating politicalnon not-for-profit organizations and at that hearing we were not given an answer, and mr. bustamany would agree, but then later the world would learn the answer at a
9:51am
public event, but i would hope t to keep this at least in a partisan and bipartisan context, because we want to find the fact s, and we want to find out who knew what when and why steps were or were not taken. i was just as outraged to learn that when she was asked the question why she did not tell congress when she was before congress, and her response was apparently no one asked her, and i did ask her, and she did not answer the question. we are all outrage and i do not believe nor do any of the colleagues believe that any political organization should be targeted because of their thought, and that is on both sides of the spectrum and i would dare say that during the prior administration by mr. shulman and mr. everson that there was targeting of political
9:52am
entities as well. that has to end. that has to end on both sides and the president shaz -- p president has been forthright in the organization and as have chairman lew. ask the questions and get the facts and then we can draw the conclusions, and with that, we will yield back the rest of the time. >> and gentlemen, thank you for getting to the truth in this scandal. let's look at one of the tea party groups in my community. the founder of a small businesswoman originally filed for tax exempt status in july of 2010 and fully 20 months later in february of 2012 she received a letter from the irs with numerous follow-up questions, a lot of them, intrusive, but she answered every one of them and return
9:53am
returned it well within the two-week time limit and now almost three years to the day that she first filed the application is first pending and now let's look at what happened to her in the three years since she applied beginning in 2010 she was visited by the fbi domestic terrorism unit, and her business and business returns were audited by the irs and she received four fbi inquiries and the business received unsolicited scheduled audits by os shshgs a and the environmental quality and the atf twice. this is a citizen and a small businesswoman who had never been audited by the irs or any of these agencies until she applied to you for tax exempt status for her tea party. the broader question here, is this still america?
9:54am
is this government so drunk on power that it would turn its full force, its full might to harass and intimidate and threaten an average american who only wants her voice and their voices heard? mr. miller, who in the irs is responsible for targeting conservative organizations? >> sir, let me first say that i cannot speak to a given case. that we have talked about 6103, but that is -- >> this is not just one case. you know we are talking about the whole list inspector general put up there. >> correct. >> who is responsible for targeting these groups? >> so, again, i'm going the take exception to the term targeting, because this was a listing. >> this is a look-out list and
9:55am
this is not a central government mandated or directive listing, and you had a be on the lookout list that you acknowledge and a case that the inspector general already verified and so the question remains, who is responsible for targeting these conservative organizations? >> so, again, and i think that if you look at the tigda report, it answers the question. >> there are no names in the inspector general's report. so i am asking you not only as the acting commissioner, but as the deputy commissioner over this organization, who is responsible for targeting these individuals? >> so i don't have names for you, mr. bray dirks and i'm willing to try to find that out, and tigda is looking at that right now. i don't think that targeting again is wrong. >> you are telling us that you have no knowledge of who initiated or who approved this target i targeting of conservative organizations? >> i will stand by the report that tigda put out there as the
9:56am
facts. >> can you assure the commish tee th -- committee that none of this information was shared with any other agency? is. >> i don't believe that is what happened as it is a violation of law. >> you cannot guarantee this -- >> tigda and others will look at that but i will be shock ed if that happened. >> if your earlier answers are any indications, we will be reading about it in the media, and we should hear the truth from you. >> thank you. mr. rangel is recognized. >> thank you, mr. chairman. it is easy to say that we are all outraged by the bush and the obama appointees? >> there were no obama appointees though under mr. shulman, and i apologize mr. rangel, what are we talking about?
9:57am
>> well, the people once it was discovered that people were put under a list, a look-out list, that type of thing and regardless of what you call it, were the people responsible in treasury department appointed by president bush as well as continued service under president obama? so that is basically question that mr. crowley was asking. >> obviously at treasury, main treasure, those individuals would be obama appointees and at the irs would be bush. >> the outrage is that it is not democrat or republican, but it involves the credibility of government as it relates to american citizens. now the president has indicated outrage, and you have indicated
9:58am
outrage, so, i would assume that we are on the same side in trying to determine how did this happen, who was responsible for it, and how far did this cancer go? how quickly can we cut it out so that tens of thousands of irs employees have this stigma of corruption taken away from them, that you, mr. miller, who is a career employee don't have to explain to your kids and friends that you are not involved in a scandal, that all of the people that serve the government, and it is too late for the congress, but not too late for the government to try to get its reputation cleaned up for america. so, i don't want to see anger with you two, but i certainly hope that before this hearing is over, that you share with us how you intend to have your voices
9:59am
heard so that america would know that whether this was criminal activity or mistake, i don't know, but we have to get on with it. now, under 501c-4 we are supposed to allow political activity to take place meaning that you can make political donations without saying how much and who made the donations, righ right? >> if i could restructure it. under 501 c-4 organizations, donors and/or organizations are not public information. >> so you can make political contributions. >> yes, to the 501c-4 that are used for political purposes. >> and you can do this as long as it is not the primary purpose, you can do this for 49% of whatever the activities are without technically violating
10:00am
the law, is that not correct? >> the test is whether your primary activities are social welfare in nature. >> and that means that te technically, you can do 49% political. >> and we have never been that precise. >> i know, but you are asking, and you could say that? >> yes. >> and after the supreme court decision of the citizens union, and there was a -- united or whatever, the application for this type of corporations exploded, increased dramatically, did it not? >> it did double, yes, sir. >> so you don't have to be a political expert to know that there was a increase in political donations given to 501c-4s. >> if one looks at the reporting on the forms 990 of political activities and the money spent, it will show an explosion in that money as well, yes, sir. >> and so, again, it is almost an invitation as to the law is written for abuse in terms of
10:01am
political activities for corporations who are primarily supposed to be doing a social service work, is that not correct? >> it is something that we have to look at closely, yes, sir. >> i mean, you should have wanted to look at this earlier before this what my friends are calling a scandal, i mean, because this is wrong to abuse the tax system. this screams out for tax reform, does it not? >> it is a area ripe for redefinition and reform, yes, sir. >> regardless of whether the republicans or the democrats did something like this, the outrage should still be there, is that not correct? >> the outrage as to the -- >> the abuse. >> yes. >> all right. thank you. this section of the law has been abused by government employees and not by all of them, but some of them, and our job is to find out who they are, and all i want to get from you, mr. miller, and you, mr. george, is your integrity that is on the line is
10:02am
the president's, and the administration's, and it is the irs employees that work hard e each and every day, and unfortunately the congress involved in this. people are losing confidence in our government and i hope that you feel the same sense to find out what caused this, how it could happen and help us to restore the confidence that americans should have in their government. i will yield the balance of my time. >> thank you. mr. ryan is recognized for five minutes. >> thank you. mr. miller, we have now established and you have acknowledged that you were briefed on may 3rd, that there was improper criteria used for tax exempt applications and in the briefing of may third, you were told that terms such as tea party, we the people, patriot, and bill of rights and constitution, and those who criticized how the country was
10:03am
run. after that, knowing of the practices, you sent letters to congress acknowledging the investigations that e discriminatory practices were taking place and this happened in november of 2012 and then you came here to a subcommittee hearing on this issue on july 25th where we were investigating the discriminatory filters used to uphold the 501c-4 applications of groups and you felt that they were conservative groups being harassed and you were asked, quote, what kind of letter or action is taking place at this time that you are aware of and knowing full well that the filters were used to target certain groups you said, and i say quote, i am aware that some 200, 401c-4 organizations fell into the process and we grouped these organizations together to
10:04am
insure consistency and quality and we continue to work with these agencies, close quote. that was your answer to this committee after you had received the briefing that targeting was occurring that you just acknowledgeded earlier that was outrageous, and the law governing how you must respond to congressional inquiries requires you to not only tell the truth, but the whole truth and you can quote not conceal or cover-up by any trick, scheme or device a material fact. how was that not misleading the committee? you knew that the targeting was taking place, and you knew the terms tea party and patriot were use and you mentioned a minute ago they were outrageous and then when you were asked about this when you were briefed about this, that is the answer that you gave us, and how can we not conclude that you misled this committee? >> sir, that was a lot of questions, sir. >> it is one, how can we conclude that you didn't mislead
10:05am
the committee? >> i did not mislead this committee, and harassment in that question implies political motivation. there is a discussion going on, and there is no political motivation here. >> let me ask it again -- >> many may i answer if question. >> here is the clarity here. here is the question that you were asked. what type of letter or action is being taken place at this time that you are aware of -- >> so the discussion of the context of that and again, go back to look at the context. there was the listing. there was the treatment of the cases. my understanding of that question is the treatment of the cases, because of all of the letters that mr. marchant was talking about is the letters. that is my response to it. we found out about the letters and we dealt with them as has
10:06am
been explained and we gave more time and we went and talked about expanding the way they could answer it, and we dealt i think fairly and successfully with the donor list issue. >> you knew of our concern of the targeting and the allegations reported to this committee and we brought you here to talk about it, and you had received a briefing that the targeting was taking place, but you did not divulge it to the committee when we were asking questions about this. you said in the answer that you were aware of some 200 501c-4 categories fell into this category, and you didn't mention cat goring by buzz words of patriot or tee party, and you knew this, but you did not ip answer it truthfully to the committee. >> i answered truthfully. >> you gave us a list the other
10:07am
day for tax exempt ed a voe adv organizations through may 22011 and we don't know how long the applications sat or how long it took to process them, and just from mr. rangel's questioning and earlier testimony, the irs was doing this because they were concerned about political activities by nonprofit swis the debate that is taking place here, and some of these that were approved are chattanooga progressive action and the progressive usa and the alliance organization, and if you were concerned about political activity, did you have targeting list that contained words like progressive or organizing in the names. >> okay. let's step back and let me walk you through the process. we centralized cases based on political activity evidenced in the file. we took a shortcut on some of it, but we collected to be blunt
10:08am
more than tea party cases. mr. george's own report says -- >> no progressive or organizing buzz words used for targeting, is that correct? >> we collected more, because any time we saw it was part of the file it went through -- >> time has expired. mr. mcdermott is recognized. >> thank you, mr. chairman. these days congress can't seem to agree on whether the sun is shining, but issue has brought us together in a way unlike anything that you have seen here. we all agree that the applications were poorly handled and the irs stiff armed us at best when we asked about it. the public servants should be held to a higher standard and none more than the group that oversees tax collection, and the irs is an easy target, and everybody wants to get a pitch fork when the tax man comes, but with the 24-hour media cycle passing around lighter fluid, it is getting harder and harder to
10:09am
get to the facts and fix what has really gone on here. there is a difference in my mind between stupid mistakes and malicious mistakes. the overwhelming majority of the applications for tax free status for political activities were from far right groups and the examiners took a shortcut which they clearly regret, and deeply get. the report says that in black and white and on page seven, quote, the determination unit employees stated that they considered the tea party criterion as a shorthand term for all political cases, close quote. these applications were singled out for the names and policy positions, and not for the activities which is what they should be singled out for. and some of the political groups were delayed in getting the taxpayer status, and that was wrong and as much as i dislike the right, i think it is wrong
10:10am
to be uneven handed in government application. the inspector general report said that no one acted out of malice or political motivation. mr. george, i want to know, do you still stand by that? >> we have no evidence at this time to contradict that assertion, sir. >> if we want to root out the causes of this, we need to talk about campaign finance laws in citizens united in 2010 when this all started. it all started after citizens united and people saw the door open and get in and do the political advertising and we don't have to report anybody's name. and applications for secret money and political organizations increased by fourfold after that supreme court. the small group of people in in cincinnati office screwed up. nobody denied that, they simply
10:11am
screwed up. but the congress, this committee messed up by not giving any clear criteria for what a real charitable organization is. the law is not clear and people have to take judgments and that means they have to collect a lot of data to figure out what people are actually up to. >> m-- mr. miller, clearly a problem with the definition of the primary definition, but as i watch this shift from find out what is right and wrong and fix it to the irs is broken and let's repeal it, and imagine a country without it, and we could have repealed that along with obama care yesterday, but i am reminded that it is only part right, part wrong and it is also about republican storyline in this agenda. fwheed to find the truth he-- wo find truth here and members of the committee have talked about
10:12am
it. the irs cannot access your medical files, is that true, mr. miller? >> that is correct. >> they cannot find out your medical information. >> that is true. >> their job in obama care is simply to collect paid financial information on which a determination is made as to whether somebody can get a subsidy for their premium, is that correct? >> were you covered and over what period is what we would be getting. >> it is not a fascist takeover that is going on here of the health care system. and let's not forget that the irs has one of the hardest and the most hated jobs, and there are thousands and thousands of good solid hardworking americans who work everyday to run the system. and a couple of people make a problem, that does not damage the organization in my view. you get rid of the people who
10:13am
made the problem, but i would really like to hear from mr. mi miller, what do you need to make it so that this wouldn't have happened before? >> well, two things, sir. i appreciate the kind word for our people, because we are an incredibly hardworking and honest group frankly, and that seems to be forgotten in all of this. with respect to political activity, it would be a wonderful thing to get better rules, to get more clear rules, and in terms of our ability to get to this work, it would be, it would be good to have a little budget that would allows us to get more than the number of people that we have to do 70,000 applications and to do our job in looking at whether the organization is tax exempt or not. >> all right. time has expired. mr. nunez is recognized. >> thank you, mr. chairman. mr. miller do you know the
10:14am
director's organization's lois learner. >> yes. >> do you know she testified before this committee last wednesda wednesday? >> i believe i was. >> did you acknowledge that she did not acknowledge this investigation at this time? >> i was engaged in other testimony at that time. >> were you aware that the irs was preparing a statement to be put out in this week? >> yeah. i don't know whether we knew at that time or not. >> wouldn't have ms. learner have known that last week when she testified before this committee? >> i don't know that. >> did you know that ms. learner was going to appear on a panel called news and the american treasury at a bar organization. >> i knew she was appearing, but i did not know the topic. >> did you or your representatives prepare the
10:15am
statements she would make? >> it was a prepared q&a. >> do you know cecilia roady? >> yes. >> do you know she was with remarks that were planned in advance. >> yes sh, i believe so. >> did you have contact by either phone, e-mail or in person with the white house regarding the targeting of tax exempt groups from 2010 to today? >> absolutely not. >> and how about the department of treasury? >> i certainly would have had some conversations with treasury in my role as acting commissioner, because i reported to them. on this topic, i believe and i have to go back to look, but it is very recent that conversation would have taken place. >> how about president obama's re-election campaign?
10:16am
>> no. >> did you have any contact with anybody organizing for america or its predecessor organizing for action? >> no. >> did you have contact with anybody associated propublica? >> i don't believe so, but there was when this whole thing came out that was previously referenced, i think that the irs might have talked to them, yes. >> something that would probably clarify your involvement in any of this, mr. miller would be if you submitted to this committee your e-mails, phone records and personal schedule from 2010 until you resigned. would you be willing to do that? >> i will see what is legally appropriate. >> you know we could subpoena those records? >> i understand. i will have to talk to the lawyers in the agency. i'm just saying that you are asking me, and i don't know, we will talk. >> mr. chairman, i suggest that
10:17am
we work hard to get those records, and i would also encourage you to contact ms. roady and ms. learner to testify before this committee at our earliest possible time. i have one last question, mr. miller. you are really not taking any acknowledgment that you knew anything, that you didn't do anything wrong and you have said it numerous times on the record today that you did nothing wrong. so i find it hard to believe, why did you resign or why are you resigning? >> i never said they did don't anything wrong, mr. nunes, but it is contained in the questions, as acting commissioner and what happens in the irs whether i was personally involved or not stops at any desk, and so i should be held accountable for what happens whether i was personally
10:18am
involved or not, and that is a very different question, sir. >> i am willing to hope that you would submit all of the e-mails or the phone records and any personal meetings that you had in the last four years and i think that would really, i think that it would keep your reputation in good standing with the american people and this committee. >> we will have to talk about this, and i'm not saying no, but i just don't no. >> thank you, mr. miller, and i yield back my time, mr. chairman. >> earlier, you referenced an article from "usa today" and i would like for the purpose of -- we will step aside from the hearings to point out that shares of tableau has opened for trading and you can see up sharply the visualization of data software company selling 8.2 million shares at 31, but watching the stock price soar and you have a couple of holders there on the board having looked
10:19am
through the s-1 who own 19 million shares and not a bad day for the company, itself, i think about 52 million shares and we will have 52 million shares in total, but offering 3.8 million and 5 million of which are sold by the company, and therefore will raise money at 31, but wow, what a performance and a number of the hedge funds reported earlier, i wish we could have gotten a bigger allocation on this one, and it is a huge winner on the morning. now, we will go back to the hearings. due to the fact that is decisive in choosing these organizations would you say that there was a litmus test? >> norse. the litmus test if any was political activity. >> political, okay. i have one of the constituents who contact ed my office yesterday outlining a pretty egregious situation and he is treasurer of a small nonprofit in massachusetts and volunteer organization, i should note, and their association was told by the irs employees that they were
10:20am
not required to file a form 990 because of the size, and they did not and this past november they received a letter from the irs saying that their tax exempt status had been revoked because they had not filed the appropriate forms, so the irs told them that they didn't need to file the forms and instead of notifying them to fix it, especially in light of the advice by the irs, the irs just went ahead and revoked the tax exempt status and now they have to reapply and pay and this is a nonprofit that has been around for 60 years. taxpayers should not be intimidated by the irs, and there is broad agreement by that today and the american people should not be afraid of the irs and there is broad agreement on that today, but we should rely on the advice they provide and not be punished for it. so i hope that we will have a opportunity to work on this particular constituent issue, but i want to the go to a
10:21am
specific topic relating to the irs and that is the question today which is the allegation that there are political views that have caused them to become that focus. we all know it is outrageous, and unacceptable and thorough review will get us to the bottom of this and make sure it does not happen again, but let's not forget something this morning with the egregious actions in the irs, there is still an underlying problem here and that is 501c-4s engaged in politics. after citizens united the irs was flooded with applications as you have indicated seeking 501c status and why was that? in large part because super pacs must disclose their donors while 501c-4s do not. as policy makers we have many disagreements amongst the committee and the parties, but however, we should agree on the whole notion of disclosure.
10:22am
now, the case that unleashed the torrent of money in public life was "buckley versus vallejvalle which in court said money enabled speech, but the caveat in that opinion which not fully acknowledged probably was written by justice brennan, quote, the suggestion that sunlight is said to be the best of disinfectants, electric light, the most efficient policeman. so as part of the scrutiny, we all ought to be able to agree based upon this problem here today that the simple act of transparency and disclosure would alleviate much of what has happened here. it wasn't a rush because they wanted to join the sisters of
10:23am
mercy and common cause for the purpose of engaging politics, it was in many instances to hide the donors. now i'm hoping that we can get to the bottom of this in fuller context, but i want to ask you specifically, commissioner, has anyone been disciplined directly related to this development review, approval, and use of inappropriate criteria and have any actions corrective actions been put in place to ensure that this has not happened again. >> let me walk through and the answer to that is yes. what happened in may when i was told this, i asked the management there to reassign an individual who had been involved in these letters that were objectionable, and i asked for oral counselling to be given to the person who we believed at the time was responsible for the list i listing. i also was aware that tigda was look agent this, and as i
10:24am
mentioned with the statement that now that they are out with the facts we can note again. i should note, mr. camp, i have to be very careful here, the oral counseling provided turned out that that person may not have been involve and so what was done in lieu of that all of the managers were brought in and wa walked through the new processes and explained that this was no way to behave as the irs and the last thing, sir, is that in terms of the future, the listing cannot be done and cannot be changed absent a very high level of approval at the executive level. >> all right. thank you. mr. teaberry is recognized. >> thank you. mr. miller in 2010 a group called organization of tea party
10:25am
organization, and they have yet to be approved and they are going to have to add under penalty of perjury, copies of all activity on facebook and twitter and resumes of the past and the present employees and whether a past and present employee or their family members plans to run for naufs the future -- for office in the future and i would like to include a "columbus dispatch" article that references this, and in the article i quote a board member from the liberty township tea party who is in the audience today, mr. tim savalio, and we are an educational group and we don't take stands or man phone banks or do any of those kinds of political activities. >> without objection, the article will be placed in the record. >> thank you, mr. chairman.
10:26am
mr. miller, section 26 of the irs questionnaire to the tea party group is as follows. provide details regarding your relationship with justin bennett thomas who is in the audience today and still doesn't know why he was question number 26. the dispatch article goes on the say that bennett thomas was shocked that he found out that the irs was asking questions about him of a group he barely knew. he had been involved in the cincinnati tea party, and he'd even served as a spokesman, but he had not worked with the liberty township tea party. quote, the obvious question that comes to mind is why am i being targeted amongst all of the others and where does this information go in the end? clearly house ed ind in the irs does it get shared with other government agencies? do i get an audit and if i do, is it against my business and all of those things go through your mind.
10:27am
now, to this day, he does not know why his name is question number 26 for organization who still hasn't received approval since january of 2010. now, the article goes on to say that democratic governor ted strictland, former governor of ohio and his top aides who i know, very political filed for tax exempt status as a 501c-3 status in august of 2011 were approved nine months later. mr. miller, another organization in ohio, the ohio lib erty coalition, and this is their, part of their documents in response to irs requests. this is only part of it. and this is, all of these documents weren't enough for the irs to approve their application. and in fact, tom zee who is a former president of the organization, and who is here
10:28am
today said they applied in june of 2010, and they finally received approval, and this was not enough by the way, and in december of 2012. one month after the november election. another lady i met in the group from ohio, freemont, ohio, who indicated their group had a book club and the irs demanded a list of all of the books they had read and a book report from the group explaining what was in the books that they read. you can't make this stuff up. this is unbelievable. now, mr. miller, i don't know how you can defend any of this, and i don't know how you can say that it is not political when the liberal group got a exempt status and the three i just mentioned didn't for over two years. and ms. learner was mentioned
10:29am
and who was her boss in 2012? >> i believe it would have been -- >> sarah ingram, maybe? >> part of that time and part of that time another gentleman. >> and that other gentleman has since submitted his resignation? >> i believe. so. >> and what is ms. ingram doing today? >> she works on implementing the affordable care act. >> who promoted her to that position? >> i would have moved her into that position. >> and why would you promote somebody i to that position who was in charge of the exempt organization division which certainly has had some controversy over the last couple of years under an investigation? >> because she is a superb civil servant, sir. >> she had nothing to do with this? >> i would not imagine to that and i cannot speak to individual cases, but i can say that generally, we provided horrible customer service here. i edadmit that. we did horrible customer service, but whether it is politically motivated or not, is
10:30am
a different question. >> but you have target and individual who to this day does not know why he is question 26. >> and mr. becerra is recognized. >> thank you, gentlemen, for your testimony, and let me key off of something that you said, mr. miller. you said that foolish mistakes were made. i think that the president said it better, and he said that the handling of the tax exempt applications in that process at the irs was outrageous and intol rabble. no excuse. and while the folks at the irs have a thankless job because they have to tell their follow americans that they may be audited or do the work understaffed, we have to maintain the confidence in this system, because it is a voluntary system of payment of our taxes. >> agreed. >> so, you are right, it was a foolish mistake, and the president is even more correct
10:31am
that it is outrageous and intol rabble. -- intolerable. >> and now when you were asked about any evidence of political motivation here, you said no. >> that is correct, sir. >> okay. >> and so what we find is a situation where inexcusable activity took place, because it erodes the confidence of the american people in a system where they participate voluntarily, and if there is a place in public service where you have to have the highest level of conduct and standards, it is at the irs. so, mr. miller i think that it is unfortunate for those who are in positions of authority, but the buck has to stop somewhere and i think that is exactly what we are seeing. it should not diminish the good work that has been done by anyone in the irs over the years and i hope you understand that
10:32am
we are here over the years to talk to the us, because we need to get to the bottom of this, and we need to clean up and clear out so we can go back to the business of making sure that people respect the fact that we have a voluntary system of paying the taxes. having said that, let me ask a question of mr. george. in your report, you indicate that -- and i think that i'm quoting correctly here -- there appeared to be some confusion between the determination officers of what is allowed by 501c or 501c-4 organizations. we believe it is due to the lack of specific guidance on how to determine the primary activity end quote of a c-4 organization. treasury regulations state that c-4 organizations should have social welfare as the primary activity of their mission.
10:33am
however, the regulations do not define how to measure whether social welfare is an organization's primary activity. so mr. george, a question. could some of the delays in processing of applications have been avoided if there were clear guidance of the section 501c-4 organizations and what their primary activity constitutes? >> a direct answer is yes, sir. but i should also note that that determinations unit did seek clarity from the washington headquarters and it took months before they received a response. >> and that a great way then to lead to mr. miller. i think that what we have been saying for quite some time many of us is that there is not clarity in what is social welfare. so you have many c-4 organizations, nonprofit
10:34am
organization, the good guysly call them, who are trying to do good work, and they are being tainted by some of the organizations that are out there and doing nothing more than political activity, because the supreme court gave them license now to go ahead to use a nonprofit status to go out there and do politics. is the law clear in your mind of what is clear in political activity? >> no, it is very difficult, sir. >> can you distinguish between section 501c-4 organizations and say a section 527 political organization? >> that is difficult. but presumably the level of political activities and expenditures needs to be less in the 501c-4 area. >> let me then suggest to you, mr. miller to go back and in the opportunity with your fellow employees at the irs and mr. george in your capacity as
10:35am
inspector, and thank you for your service, but to communicate that we need you all to give us the best sense of the guidance to not have a proliferation of organizations who are abusing the nonprofit status attacks payer expense, because they get all of the write-offs to run into this situation again and the american people can have confidence in the system and the government. i thank you and i yield back the balance of my time. >> thank you. mr. rikert is recognized. >> i have five minutes, but i need about five days to question you. i am hearing, i don't recall, i don't know, and you don't know who investigated the case, but you don't even know that it is investigated and who is investigated. you are not instilling a lot of confidence in this panel and the
10:36am
people across this country. but i want to go back to your version to the word target or targeting. and you said there was no target because there was no intent. not withstanding the intent of irs pers e nel-- personnel, wou you not say that certain groups were treated differently because of the policy situation? >> were groups treated differently, and that is the question, because of their belief, policy position or their name? >> no. >> that is a yes or no question. >> no. >> no one was treated differently? >> may i answer? i would like to be a little broader than a yes/no, and i understand your view, sir. my understanding of the cases that went into this queque is that it included elements throughout the political spectrum that of the 300 cases that were looked at by the
10:37am
treasury inspector general, 70 of the 300 had tea party in the name. my understanding is that the organizations that -- >> excuse me. mr. miller, it is my time and i'm going to take it back for now. i'm not going to be delayed here. so your answer was no. no one was treated differently. but to take you back to mr. ryan's question, you knew that group groups with the term tea party had been automatically subjected to extra scrutiny. you have admitted that today. you acknowledged your investigation to whether certain groups were being treated differently, whether there was intent or not, and didn't this committee have the right to know? >> i answered all questions truthfully, sir. >> didn't this committee have the right to know that groups were being treated differently? that you have a group of 200, 300 or whatever the number was, did not this committee have the
10:38am
right to know? >> i answered all of the questions i was asked. >> so your answer is a non-answer once again. it's an easy question. do you not believe that congress has a right to know all of the information that you have -- >> and i was -- >> mr. miller, does this committee have the right to know the information that you knew? yes or no. >> this committee -- >> yes or no. >> that is an easy question. >> this committee always knows the information. >> and this concept -- >> mr. miller, please. >> yes, sir. >> you testified before this committee and you did not provide the information and you did not share the information that you knew, so my question is, do you not believe, and this is the united states congress here that you are accountable to, which is accountable to the
10:39am
people, the american citizens across this country, and do you not believe it is your job to provide was the information that you knew so that as you said the people of this country can be properly served honestly? you are a law enforcement agency for crying out loud and it was a cop for 33 years, and now you have raised your right hand today. did this committee have a right to know what you knew, yes or no? >> i answered all questions truthfully, and i will tell you that i did not have -- >> i want to go to mr. george because you are not going to cooperate with me, mr. miller, and you have been uncooperative in this hearing. mr. george, we have heard that an early draft of your report indicates that you are unable to determine who initially directed the irs employees to target groups based on their political beliefs, is that true? >> that we were unable to, yes. >> and mr. miller, you are the
10:40am
commissioner, and who is responsible? you were conducting the investigation, who was responsib responsible? >> i don't have that name, sir. >> why not? >> i don't have the -- >> have you asked anybody? >> yes. >> who did you ask? >> you don't have that name either. >> i will be glad to provide the names. >> let him answer the question. >> it is the gentleman from washington state's time. >> who did you ask? >> i asked the senior technical advis adviser. >> and what is the senior technical adviser's name? >> nancy marks. >> and what did nancy tell you who was responsible? >> and i don't remember to be honest. >> you don't remember again. >> and time has expire and the committee, there are votes on the floor of the house of representatives and the committee will recess for 15 minutes.
10:41am
you have been listening to the hearing of the irs scandal with democrats and republicans asking the questions and mr. miller getting a vast majority of the questions and heated at times, and certainly very pointed. threatening to a certain extent as well, but i'm not sure that we have learned that much going into. >> there is an exasperation on the part of the republicans trying to prove it went up the political scale and at the same time the democrats trying to keep it quite partisan and fascinating. >> and you can see the talking points, because mr. mill ser saying that i answered every question honestly, and that is the answer to almost every question that has been pose and the committee is getting frustrated. >> indeed. and that assertion in terms of honesty. we will take a break here on cnbc, and come back with the coverage of the business news in general and the markets in
10:42am
particular after this. (announcer) at scottrade, our clients trade and invest exactly how they want. with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. awarded five-stars from smartmoney magazine.
10:43am
[ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪ [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room. [ static warbles ] available out there. i knew devry university would give me the skills that i needed to make one of those tech jobs mine. we teach cutting-edge engineering technology, computer information systems, networking and communications management -- the things that our students need to know in the world today. our country needs more college grads to help fill all the open technology jobs. to help meet that need, here at devry university, we're offering $4 million dollars in tech scholarships for qualified new students. learn more at devry.edu.
10:44am
♪ je t'adore ♪ c'est aujourd'hui ♪ ♪ et toujours ♪ me amour ♪ how about me? [ male announcer ] here's to a life less routine. ♪ and it's un, deux, trois, quatre ♪ ♪ give me some more of that [ male announcer ] the more connected, athletic, seductive lexus rx. ♪ je t'adore, je t'adore, je t'adore ♪ ♪ ♪ s'il vous plait [ male announcer ] this is the pursuit of perfection.
10:45am
all right. the house ways and means committee take ing a recess in e investigation or hearings into the irs scandal. let's bring in ameamon javers. >> well, nonetheless, on the hot seat to dday is mr. miller who s ousted and having trouble to answer the questions. one is that members of the republican committee want to know whether the committee, itself, had the right the know the information that miller knew about the scandal at the time that he knew it when he testified previously, and miller having a very hard time answering the question. he is simply saying that i answered all of the questions truthfully, which is not in response to the republican questions here.
10:46am
and another one that the members on the republican side are going after is who is the official who actually approved the tea party screen to be applied to the nonprofit groups that were seeking nonprofit status? that name was not in the inspector general's report, and there is a swirl of questions here in washington about who was the official who actually approved this? mi miller says in his testimony here that he simply doesn't have that name. that is causing some frustration on the republican side, and meanwhile, on the democratic side, they are also expressing outrage here, but seeking to sort of widen out some of the questions here and asking why some of the political groups get nonstatus in the first place and pointing out the individuals involved in this appointed by the obama administration, and one of the highlights is in which paul ryan, the former vice presidential candidate who views this as personal to him really went after miller. listen to this exchange.
10:47am
>> how can we not conclude that you misled this committee? >> sir, that was a lot of questions, sir. >> it is one. how can we conclude that you did not mislead this committee? >> i did not mislead this committee, i stand by my answer then and i stand by the answer now. >> that gives you the flavor of the scrutiny that miller is under in the course of the morning and when they come back from vote ws, we will hear hear more of this. >> it is a fascinating performance by miller. i mean, is he a man in total command of the facts? does he have nothing to lose and what about the division of between what washington irs was saying to cincinnati irs in the possibility that there were counter commands within the organization. >> well, that is clear. i mean, it is clear that at various points folks in washington were telling folks in cincinnati inside of the irs to change the criterion and that criteria appears to have been changed several times back and forth between something that was
10:48am
inappropriate to something on this side of the line in terms of appropriateness, and clearly a division inside of the irs here, and in the ig's report, they state clearly individuals in washington and cincinnati who were aware of this situation and involved in it, throughout, and so clearly, there is a problem in here within multiple levels of the irs. that is what some of the republicans are trying to get at here is the question of who was actually responsible for this. it is a fascinating moment here where miller is forced to say that he doesn't know who was responsible for it even after all of this and the headlines and his own resignation being forced over this issue. >> let's bring in john harwood who has been listening to the testimo testimony. what is your analysis, john? >> well, there is an interesting subtext here which is that dave cam whop is chairing the hearing the chairman of the ways and means committee and max baucus want to use this scandal to propel to reform the tax system and make the case that the tax
10:49am
system produces skepticism and even maybe corruption, but i asked him whether or not the public would have confidence in what they were doing because of all of the people lobbying the issue including their former aides. here is max baucus and dave c camp. >> it is my goal, and chairman camp's goal to be totally transparent, open, in this process so that there is more trust all of the way around and especially with the american people. >> and what would you say to the people out there who say, come on, 28 people who used to work for you are lobbying on this. >> well, they will do whatever they do, and they are not influencing me. what is influencing me is how to make the code much more efficient, and how to make it more competitive so that the american companies are more competitive and make it more simple and get rid of the complexity and help individuals and small business, and that is what is driving me. >> and of course, on the competitive part, they want to get the rate down, and how do
10:50am
you do that? by taking away the loopholes, but the home and state mortgages and tax exempt organizations have powerful constituencies. >> what i have blank sheet of paper and decide what goes in. >> why one sheet of paper when you have home builders and the housing stri and you have governors from high tax states saying come on. >> that will help us better determine which provisions are really the most important. >> is there any one of those provisions that you two agree, no, we're not touching that. >> no, no. i'm not going down that road. everything is off the table.
10:51am
then everybody's provisions go off the table. >> we'll talk about if they can use the outrage to propel this forward. >> specifically towards wealthy individuals and corporations not being able to put money into these tax exempt shell ls. do you think they can make that the center of the debate? >> the goal is to get the corporate rate down. possibly the individual rate, although that's more individual. but this is always what ties up the congress. it's why we haven't had a major tax reform since 1986. dave camp and max baucus will decide if they can replicate the fee. we will go live to the irs hearing as soon as it restarts. and it's one year ago that faigs
10:52am
book went public. we're live with what the next year could bring for the social network and other tech stocks that are rocketing. like google and netflix. ♪ ♪ here we are, me and you ♪ on the road ♪ and we know that it goes on and on ♪ [ female announcer ] you're the boss of your life. in charge of making memories and keeping promises. ask your financial professional how lincoln financial can help you take charge of your future. ♪ ♪ oh, oh, all the way ♪ oh, oh ♪ oh, oh, all the way all stations come over to mithis is for real this time. step seven point two one two. verify and lock. command is locked. five seconds. three, two, one.
10:53am
standing by for capture. the most innovative software on the planet... dragon is captured. is connecting today's leading companies to places beyond it. siemens. answers.
10:54am
10:55am
you're looking at a live shot right there of inside capital. we are still in recess, of course. the house, ways and means committee in which we've been hearing from steven miller. was the acting irs commissioner until he resigned yesterday. and the treasury inspector general have been witnesses. they will be back. we will be back when they resume. >> it seems like they are getting started with the questioning. another big story we're following today. it's been one year since facebook went public as the social network moves the forward. what are the big threat to business and any potential plans for the future? >> well, kayla, they need to avoid overwhelming users with ads or violating the privacy. they also need to keep
10:56am
innovating or acquiring in a couple of areas. rupert murdoch warning that hours spent dropping first bad sign as seen by myspace years ago. facebook disagrees, saying the younger users are the most engaged. but teens and 20 somethings are increasingly spending times on tum j tumblr. twitter is also a big threat. and it's an alternative to facebook's closed network. the most powerful tool to stay cool is instagram. but it has zero ads, putting pressure on how facebook handles the inevitable ad ruleout. mobile users are driving facebook's growth wchlt the home app off to a slow start, they are looking at services to keep users engaged.
10:57am
a payment app would make sense as would the acquisition of ways, a social travel application app. and unlike twitter which has vine. facebook has been making a big push for its messaging services. unlike facebook, it asks them to stay app free. they are always on the lookout for technology to improve the ad quality. we'll have to see if they make acquisitions there as well. >> thanks so much, julia. still to come we'll take you back live to the irs hearings. and we get mark mahaney's take on facebook and what he thinks are the biggest threats for the company in the future. ♪
10:58am
(train horn) vo: wherever our trains go, the economy comes to life. norfolk southern. one line, infinite possibilities. so you can capture your receipts, ink for all business purchases. and manage them online with jot, the latest app from ink. so you can spend less time doing paperwork. and more time doing paperwork. ink from chase. so you can. dave's always wanted to do when he retires -- keep working, but for himself.
10:59am
so as his financial advisor, i took a look at everything he has. the 401(k). insurance policies. even money he's invested elsewhere. we're building a retirement plan to help him launch a second career. dave's flight school. go dave. when people talk, great things can happen. so start a conversation with an advisor who's fully invested in you. wells fargo advisors. together we'll go far. vietnam in 1972. [ all ] fort benning, georgia in 1999. [ male announcer ] usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection and because usaa's commitment to serve military members, veterans, and their families is without equal. begin your legacy, get an auto insurance quote. usaa. we know what it means to serve. a lot can happen in a second. with fidelity's guaranteed one-second trade execution,
11:00am
we route your order to up to 75 market centers to look for the best possible price -- maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. we are life here at the new york stock exchange. why don't we give you a check on the markets. there you can see we're having a rally on this friday.
11:01am
about one-third of a percent on the dow. financial stocks also mauving up today. we saw consumer sentiment for april. maybe that's helping a bit here. we are having a nice rally there. goldman sachs is up other 2%. nord strom is one of today's biggest users. it loierred estimates for 2014 revenues. want to also remind you that we are awading for the irs scandal hearing to get back under way in capitol hill. they are about to resume that hearing. which went about an hour and 10 minutes before they took a recess. some are beginning to speak. let's listen in. >> mr. george, many charges have
11:02am
been made here this morning. you as inspector general have a statutory responsibility as inspector nen to prevent and protect fraud in the operations program. the you not? >> that is correct, sir. >> and as best as i understand, you have fulfilled that rightfully. let me ask you if the inspectors that you have if you have any evidence of corruption on the irs. >> not at this time. sir. >> eat let me ask if if you have found that our tax system is rot an the core? >> not, rotten at the core, sir. >> and let me ask if you if using your statutory powers and fulfilling your responsibility that the irs determine who picks and wins in america.
11:03am
>> i don't believe that's the case. >> no, sir, you have not. and the statements that have made and inflammatory charges at the beginning of the hearing have no basis of fact, at least any fact that's been demonstrated this morning. it's important that in addressing and fully correcting one wrong, we not complete and be voed in other wrongs. such as encouraging the proliferation of secret money. not just the proliferation and pollution of our democracy by that money, but that it be tax subsidized in secret corporate money. using this incident as a basis for shifting even more of the burden of financing our defense and aur government services on the working people.
11:04am
that we have an agenda to undermine the full and affected imply menation of the affordable health care act so that the health care crisis has ended families across the country. that's what is at stake here. it is not based on any fact associated with this investigation to this date. as indicated by the republican appointed inspector general whose job it was to determine if the charges had merit. let me move to an area where i disagree with democratic colleaguing and comments this morning. i don't believe there's any lack of clarity in the statute here. the statute that's in effect has been in effect for decades. and it requires before there is tax exempt status, as mr. lawrence o'donnell, as the crew group, the citizens for
11:05am
responsibility and ethics in washington has pointed out in a petitio petition. >> the statute is exples sit. the regulation the irs adopted 30 or 40 years ago uses different language. >> if this is directed to me, that's a tax policy question. i'm not in position. >> i'm not asking you for tax policy. i'm asking for a clear reading of the statute that's been in place for decades and is in place today says thereby should be a denial of tax exempt status to any group not exclusively engaged in social welfare operations. and only after a regulation adopted long ago before you were at the irs that changed
11:06am
exclusively to primarily that was discretion for the dex to be involved in this operation. >> i do know that we have indicated that some clarification from those in the policy area of the department of treasury might be needed in this area to help clarify again. >> well, in april, citizens of responsibility for ethics in washington filed a petition with the treasury department and the irs to address that. if the clear wording of the statute was followed, we would not be dealing with selective enforcement. we wouldn't have problems with enforcement in this area at all. thank you for your testimony. thank you for yours. >> thank you.
11:07am
time has expired. >> thank you, mr. chairman. you may object to targeting, but it's used in the ig report 16 times. it's a common understanding of the word. and so i would suggest that it's a well settled doctrine and we not waste time on it. you spoke about the question beforehand. can you tell us about that conversation? >> i did not speak to celia. i believe i did talk to lois about the possibility of now that the report was finalized. now that we knew all the facts. now that we had responded in writing and everything was done, did it make sense for us to talk about this in public. >> can you walk me through the logic that animated in your mind where you thought it would be a good idea to make a public disclosure to the american bar association rather than following up on your duty to disclose that to the house.
11:08am
so our attempt was to talk to you at the same time. >> but that didn't happen, did it? >>. >> what other recollection do you have? what other experience did you have when you were talking about the steam to have the planted question? >> i'm not sure what you're asking. >> what is your recollection of that question? >> where did the conversation take place? >> i believe it was over the phone. >> what day did the conversation take place sf. >> i have to look at my notes? >> you have notes on that? >> i have to try to find them. >> why did you say you have notes if you don't think you have notes? >> sir, please. i don't. >> please? do you have notes or don't you have notes? >> i don't know. >> let's shift gears. a little while ago you were
11:09am
being -- you engaged with mr. ryker on the question to whether you knew that this committee, in whole idea of zuz the committee have the right to know the information. and then you shelt iryourself in the idea that i've always told the truth. you're a lawyer and i'm a lawyer. you knowdown sill has a duty to disclose that to the opposite party. there's no perry mason moments. there's not gotcha moments. there's no situation where somebody says we are just showing up with this information and we haven't disclosed it to the other side. don't you acknowledge that you had a duty based on your testimony before the committee of what your actual knowledge was? didn't you have a duty to come forward and disclose that to the committee based on all this
11:10am
cascading and inquiries that happened from the ways and means committee? >> i don't believe so. again, the processing was bad. the listing was bad. those are two different dealings. they were getting all the facts. we were going to wait for them to get the facts so i didn't come in and either mess up their investigation or otherwise give you facts that were not correct, sir. >> so you weren't concerned about the timing of the investigation when you and miss learner decided to move forward. we had the facts. we made the written response. >> so you had the information. the totality of the information that you're describing today.
11:11am
you had it all in your possession at the the time that you were going to do a planted question. is that right? >> i sort of object to the term scheme. we had the information. >> and understanding, a written or not written down contemplated. call it what you will? you had all the information isn't that right? >> we were reaching out to the committee at the same time. >> what form did that take? >> we called to get on the calendar. >> you called to get on a calendar? is that all you got? >> it's the truth. >> i find it incredibly ironic. on the one hand you're arguing that the irs is not corrupt. but the sub text is you're saying, look, we're just incompetent. and it's a perilous pathway to go down. there's sorlt of a notion that
11:12am
hasn't been storily answered. and that is if the targeting wasn't targeting. if it wasn't based on philosophy, how come only conservatives got snagged. >> they didn't, sir. organizations from all walks and all persuasions were pulled in. that's shown by the fact that only 70 of the 300 organizations were tea party organizations looked at by tigna. >> but your testimony is in contradiction. >> time has expired. mr. thompson is recognize. >> thank you, mr. chairman. i appreciate that we're having a hearing and want to get to the bottom of this. as important i want to make sure that we are able to do all that we can to prevent it from happening again. from all the system reasons that my of my colleagues on both
11:13am
sides of the aisle mentioned today. and i want to associated myself with the outrageous and intolerable group as to where i think this ranks. what i would like to know, general george, first, in your testimony you had a section titled results of review where you say the irs used inappropriate criteria for identifying these organizations. is that legal? >> is it legal? >> i'm trying to get a sense of what inappropriate criteria is -- >> it is not illegal, sir. >> and you enumerate them, inappropriate rye tier ya develop and stayed in place for a total of more than 18 months.
11:14am
is that illegal? >> it was not illegal. it was inappropriate. if i may, it's contrary to other regulations and policies that are in place by the department. >> understand. the substantial delays. is that illegal or inappropriate? >> it's inappropriate. >> and then the third, the unnecessary information, illegal or inappropriate? >> inappropriate. >> thank you very much. you also outline recommendations that you think are the most critical and explain if they are enough to prevent this from happening again. are they? >> the vast majority are, and the irs agreed to the vast majority of them. >> and do you have some mechanism, some matrix for making sure they are put in
11:15am
place? is there a plan to go back and review these and to continue your good review to ensure your recommendations are followed out and that your recommendations are enough to protect the citizens of our great country. >> mr. thompson, you anticipated our entire future plan. we are both going to look to see if the irs has successfully implemented or someone indicated the president would ensure the irs complies with recommendations and it would be our attention to gampb tee that that has occurred. zbr one of the responsibilities that we have is also an oversight responsibility. is there something in your recommendations and in your skent plans?
11:16am
or do we have to find out about this outrageous and intolerable behavior through some other means. >> we publish an audit plan each year laying out which audits we are going to engage in. we solicit ideas from congress, from the administration and from anyone with a tangible role in the system of tax administration. and it is our intention to once again do that. there is no doubt in my mind that we will follow up with congress on this matter on a regular bay sils. >> thank you. mr. miller. what are your obligations in regard to reporting this type of behavior to congress? >> i would have to go back and take a look. i don't believe there's an obligation. what happened is we knew tigna was in.
11:17am
i knew it was in? may almost immediately when we were involved. we had a neat meeting in may where there was an indication they would be done this summer. our understanding is they were going to get the faks. they were going to get them out there. >> is there a need to pass specific legislation that would make it more difficult or impossible for this to happen again and to strengthen the requirements for reporting when something this outrageous and intolerable takes place? >> i have to preface that the secretary has delegated tax policy questions to the assistant secretary. >> time has expired.
11:18am
>> thank you, mr. chairman. according to the inspector general report, the irs started the handling in early 2010. and to swing back to some of the prior testimony, mr. miller, you indicated that you never spoke -- or excuse me. before i ask the question, let me highlight two pieces of media articles that appear. in september of 2010 there was an article concerning the concerns of the woke industry's attorney that there was confidential taxpayer information, potentially in the hands of senior administration officials that were part of the august 2007 background briefing. subsequently a few days ago in the usa today there was a column
11:19am
from a gentleman connected with the national organization of marriage who indicates in that op-ed that the release of this organization's confidential tax return to the human rights campaign is the canary in the coal mine of irs corruption. contrary to assertions that the targeting was an error in judgment by low lel irs bureaucrats. the release of the day to to a group of this nature suggests simplici simplicity. so back to the information sharing of record taxpayer returns with might be outside of the irs, you ind kalted in the testimony some moments ago that you never spoke personally or communicated personally with anyone in the house about the sharing of tax credit information. is that correct? >> i believe so. do you have any reason to
11:20am
believe that you spoke to someone within the white house or communicated in another way about the sharing of confidential taxpayer information? >> i don't think that would happen. >> so your answer is no, you did not? >> i don't believe i did. >> are you aware of any other irs official from that time period to present that communicated with anybody the white house concerning the sharing of confidential taxpayer information to somebody outside of the irs? >> can i ask -- are you asking whether -- >> i'm asking if you're aware of anybody else in the irs that ever from january of 2010 to present communicated or spoke anybody in the white house about the sharing of taxpayer informatio information. >> i don't believe so. just so i'm clear on what i'm answering are you talking about if i believe we shared information? >> whether you believe any taxpayer information was shared?
11:21am
all that information being shared with somebody outside of the irs in violation of section 6103. >> i have no knowledge of that. >> you have no knowledge. >> that's a question i understand. >> you did indicate that you did speak yourself can pressure pri department officials. i'm not saying the white house. i'm saying the treasury department. you did speak to somebody in treasury about that. is that correct? >> i don't think so. >> i'll ask more clearly and directly. did you speak or communicate with anybody in treasury department who was not in the irs about the sharing of confidential taxpayer information in violation of 6103? >> can i rephrase it? >> no. >> i don't know what you're asking. if you're asking me did i ever share 610 #. >> i deny ask that. did you communication or speak with anybody in the treasury department, not within the irs,
11:22am
about the sharing of confidential taxpayer information? >> i don't believe so. i don't know if you're talking to the subject, which would be fine to talk to them about. >> that's what i'm trying to inquire about. i'm trying to find out what you did, what you knew, who you spoke with. you're saying at no time from january of 2010 to present did you speak to somebody in the treasury department about the sharing of confidential taxpayer information? >> no, what i'm saying, sir, is the following. >> no, i would like an answer to my question, sir. did you ever do that? >> did i talk to them? >> or communicated? may have been by e-mail, by facts, by sign language. >> i don't believe so. i never talked to them about the rules around it. the news reporting about the national organization of marriage and the concern they had about the sharing of their
11:23am
confidential information. you indicated on the record you were aware of the news story. did you talk or communicate with anybody outside of the irs in treasury about that issue? >> i don't know. i don't believe so, though. >> check all of your records, all of your notes, all of your e-mails to get back on whether the answer is different than you're providing now? >> what i can say again -- >> time has expired at this point. let's move onto mr. kind. >> listening to a series of heated exchanges between members of the house, ways & means committee. steven miller, the former acting irs commissioner, forced to resign by president obama. >> hi, david. well, some really tough questions here for miller. right now the issue that the republican side is grilling in on is whether or not miller
11:24am
communicated with anybody at treasury or white house. miller is saying that he did not communicate information himself. he didn't share information himself. whether he talked about the topic generally, though with treasury appears to be a different question. then of course we have seen heated exchanges. including an exchange over whether or not miller kept notes of certain conversations. take a listen to this exchange with the congressman. >> what day did the conversation take place? >> i would have to look back at my notes on that, sir? >> you've got notes on that? >> i would have to try to find them. >> why didn't you say you have notes if you did? >> sir, please. >> please? do you have notes or don't you have notes? >> i don't know. >> so that's the kind of day that steven miller is having, guys. a very tough one on capitol hill for him. the notes, who knew, what
11:25am
information he transmitted to the treasury or the the white house. all of these seem to be open questions still. members on the republican side trying to get answers to it. the issues are expressing outrage about this. about money in politics and other issues. >> thank you very much. we'll come back. we need to take a break and pay some bills. then we'll be joined by mark mahaney and look back at the day that facebook went public. the ever expanding, pushing to mobile and if it's a play you should have in your port foal yoef. and later, a silicon valley insider weighs in. the coo of yahoo joins us live.
11:26am
bob will retire when he's 153, which would be fine if bob were a vampire. but he's not. ♪ he's an architect with two kids and a mortgage. luckily, he found someone who gave him a fresh perspective on his portfolio. and with some planning and effort, hopefully bob can retire at a more appropriate age. it's not rocket science. it's just common sense. from td ameritrade. with the innovating and the transforming and the revolutionizing. it's enough to make you forget that you're flying five hundred miles an hour on a chair that just became a bed. you see, we're doing some changing of our own. ah, we can talk about it later. we're putting the wonder back into air travel, one innovation at a time.
11:27am
the new american is arriving.
11:28am
welcome back to "squawk on the street." if you didn't remember, it's been one year since facebook went public. let's get more insight on where facebook goes from here. mark mmahaney has an outperform
11:29am
rating on facebook and a $32 price target. mark, thank you so much for joining us from sunny menlo park this morning. thank you for being here. i want to talk about the concerns one of those was a dependency on zynga. the other was the challenges in mobile. what is your view on those two issues? >> so at one level they have started to address both of those, zynga was easier to address. and the other gaming companies that are coming in to fill the void. so that risk has been hedged. the mobile issue, this was one
11:30am
where the company was blind sided. now you have gone from doing nothing to about a billion and a half revenue run rate. that's a good positive fupdmental trend for the company. you started to see that mobile shift for them positively. >> you mentioned the user engagement hasn't fallen off. we had the tweet saying the hours spent are dwindling. that was a warning sign on myspace. do you think he's right? >> well, he has a lot of experience. we've seen them do the right things.
11:31am
they have to do this constantly in order to maintain the level. what we know tr the company, which is significant, there's a lot of disclosure that the daily average users are growing faster than monthly users. when that turns it's the red flag. so i haven't seen the engagement problem. maybe they are jerking over to other sights line instagram. the advantage is they brought the company. and you can now pay a dollar to send a message to a stranger. if you have a professional page, you can pay $20 to get analytics on your advertising. seeing the proposal to pay for so many things on a site that people used to use for fun, you don't think that the experience is getting adulterated at all? >> no, i think that's a very
11:32am
legitimate risk. all we know is this was one of the most undermined assets. could they increase the monetizi monetizing? could they do that without losing users? we have seen them ramp up the advertising. we haven't seen the losers get lost yet. they're still growing overall users at 25% year over year. so that's a positive. and the level of engagement. the amount of time each user is on the site is increasing. so far they've done it well enoug enough. >> you are basically imbedded in the internet industry. a lot of people are concern ed that they're going to tumblr. does facebook need to bid
11:33am
against marissa if that is the case? >> i don't have any confirmation on that. yahoo! is a company looking to do a lot of acquisitions. i'm not sure facebook needs to do that level of acquisition. this instagram property that they have, which is highly popular, completely unmonotetiz. i don't want to overstate it. they came up with a good acquisition about eight years ago, which was youtube. i've seen what they have done to the company. there's the potential to do the same thing for facebook. it's just a potential. >> mark, i real quick want to come back to this tweet from david rupert. hours spent participating per member is seriously dropping. is he looking at numbers we're not aware of or is he wrong? >> well, my guess is i don't know what numbers he is looking
11:34am
at. this is almost irrelevant given thatted their of facebook is mobile devices. but david you just mentioned the company facebook should be the most concerned about, which is twitter. if a year from now this facebook stock is 20 or 30% below my guess is the reason would be the usage shifted to twitter. >> mark, we have to leave it here. do we get back to ipo price of 38 ever? >> ever? yes. in the next few months? no. meanwhile, dramatic testifying next before congress.
11:35am
>> simon, apple is being mum on what we can expect from cook's testimony on tuesday. not surprisingly in an interview with other media outlets, he says the tax rate of 35% is too high, telling the "washington post," we're not proposing it be zero but i think it has to be reasonable. cook testifies before the senate sub committee on permanent investigations. it says the $132 billion is made offshore where it generates 66% of the sales. if the $102 billion is braug back to the u.s., apple faces additional taxes. typically the difference between the overseas company tax rate and that of the u.s.'s at 35%. apple points out it pays billions in income taxes. by the estimates, about a million dollars an hour on the money made here in the u.s.
11:36am
thanks to deductions and incentives, the overall rate of 24% is well below the 35% rate. the professor of harvard business school has consulted with apple about tax reform. his own thinking, he told cnbc, on the subject, is that the u.s. should lower the tax rate to be more competitive with other countries. they could be put to work more efficiently here. advocates say it's increasingly possible as they hold less advantage when it comes to wages for high-end manufacturing. we will watch on tuesday. david back to you. they were spark plying in
11:37am
congress. this is one of the hot etest ip i have seen in years. the price talk was a few days ago tableau was at 26. it's trading at 48 and change. insiders own the stock at roughly 43 cents. 43 cents, not $43. it's a remarkable story. it will it's about big data. you staid the word cloud computing. this year the magic word is big data. the ceo said his company is easier to analyze their own information. >> i think there's a lot of excitement about data and analytics. people are calling it the data of the 21st century. >> bottom line, this is big data's first big ipo. the others will be coming very
11:38am
soon after you saw those kinds of prices. these are all names moving the market. once again this week, these tr the outperformers. it's financials. financial stocks up 3% on the week. consumer staples are respectable as welt. the s&p 500 pushing the forward here. thomas lee is getting more bull ish now for the end of the yeek. but it's tough making the arguments here. the transportation index with a new high. two major reasons a lot of people are still relatively bullish on the markets. >> thanks so much, bob. we have breaking news from steve liesman. steve? >> thanks so much. bloomberg l.p. in an effort to get in front of the privacy
11:39am
breach are announcing they hired the sam palmisanot former chairman of ibm to undertake a review of the company's packages and policy related to client data and end user information. this includes access issues raised by the clients. in a second move they have also announced that clark hoyt, editor at large at bloomberg, also the former public editor of "the new york times" will conduct a review of his relationship with the commercial operations. these issues have been talked about by complainiant clients o including on wall street, central banks and the treasury. we wrote a piece today on television.
11:40am
the privacy reach and the review that bloomberg is conducting. it looks as if they're taking several very serious steps right now. they will certainly get up to speed on the criticism out there against the company. >> it says the review that hoyt is planning to conduct, that all necessary resources will be available to this mr. hoyt to conduct the review. but we have yet to see any results from that. >> we asked bloomberg that question yesterday. as to whether or not results of public reviews will be made public. what i think is interesting here is the issue of the velgs ship from bedroom berg news is it looks to me as a subject of the
11:41am
review. all we know is a report in "the new york times" that said several hundred journalists at bloom berlg used that special access to historical log-in information in the reporting process. again, i know one of the things the wall street banks want to know. the extent to which that information found its way into stories. they wondered specifically what stories. and we don't know if it is something that will be made public. it's a question we will ask again of bloomberg. >> we may have several dozen reporters. we don't have several hundred. >> we want several hundred. >> let's move to the gold falling for the seventh session in a row. we find sharon epperson there live. >> gold is down $25. it's broken below the april closing low of 1361 so far today. we are looking at gold that
11:42am
continues to be under pressure. the strength of the dollar is certainly a factor. that has contributed to the losses in the gold market and breaking below the low is going to have more selling take place. we're looking at what the san francisco fed president said about the possibility of slowing and ending of bond buying as early as this summer as another factor that is contributing to the losses that we are seeing in the gold market. and then you have to look at the holdings that have declined so considerably so far this year. and commodity funds up nearly $10 billion. that's more than the $7 billion loss in commodity funds in the first quarter of 2013, and a lot of that is gold and silver ets. silver futures on pace since october of 2010. and take a quick look at the oil market as well. the oil prices have given up the gains. the dollar is somewhat of a
11:43am
culprit. the fact that there's plenty of oil that we had in the u.s. that's why the gains have been given back a bit. oil above $95 a barrel. simon, back to you. >> thank you very much. coming up on the program, an insider's look at facebook. daniel rosenweig's views changed since a year ago? what the former ceo of yahoo has to say. and we look at mark zuckerberg's net worth before and after his company's ipo and where the numbers stand now. "squawk on the street" will be right back. ♪
11:44am
[ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪ [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room. [ static warbles ] ♪ [ female announcer ] you're the boss of your life. in charge of long weekends and longer retirements. ♪ ask your financial professional how lincoln financial can help you take charge of your future. ♪
11:45am
available out there. i knew devry university would give me the skills that i needed to make one of those tech jobs mine. we teach cutting-edge engineering technology, computer information systems, networking and communications management -- the things that our students need to know in the world today. our country needs more college grads to help fill all the open technology jobs. to help meet that need, here at devry university, we're offering $4 million dollars in tech scholarships for qualified new students. learn more at devry.edu. ♪ je t'adore ♪ c'est aujourd'hui ♪ ♪ et toujours ♪ me amour ♪ how about me? [ male announcer ] here's to a life less routine. ♪ and it's un, deux, trois, quatre ♪ ♪ give me some more of that [ male announcer ] the more connected, athletic, seductive lexus rx. ♪ je t'adore, je t'adore, je t'adore ♪ ♪ ♪ s'il vous plait
11:46am
[ male announcer ] this is the pursuit of perfection. coming up next on the half, a nonvoting member starts a stock selloff. and the traders weigh in on where the rally goes from here. and is the momentum gone for one travel stock up 30% this year? two trader ds beltway it that this year. david, we'll see you at the top of the 15. it was one year ago, of course, that facebook shares went public. facebook has been busy making big changes in mobile and a lot of other things. we know him well. he was here not that long ago. yahoo! almost bought facebook back in '06. it didn't happen. that would have been a good deal, dan.
11:47am
but buying the stock on the 38 last year still not so good. what kind of grades do you give them over the past year as a public company? >> from an execution standpoint they have done everything they said they were going to do. now 30% of the business is on mobile. they said they were going to bring out innovations, they have done all that. there is a disconnect between the ipo and the execution, which has been actually quiet excellent. it's hard to understand the difference between them. you look at the daily users versus monthly users. there's a lot of good stuff going on. >> kayla? >> dan, as wire recounts the deal a few years ago -- i think about five years ago they had a big profile. you went to terry with a million dollar deal. mark zuckerberg turned it down. they said i'm not going to give
11:48am
you a blank check to this buy the company. but did you think that you would be seeing the company down sharply from the ipo? still a $65 billion company? >> well, first of all, some of the facts are not accurate. terry was a big advocate for trying to do the deal. but who knew how valuable it would be? but what was clear is the momentum was so strong. we found facebook at 4.5 million users. now it's got a billion users. we knew that it captured a very powerful demographic that was onto something very different than myspace. they went to real names, real identity, real community. they had taken a very different path. it was really powerful and growing quickly. i don't think anybody could have anticipated the full value. it's really at the beginning of what mark and sheryl are trying to do. >> you mentioned myspace.
11:49am
we had the tweet from rupert murdoch. the first real bad sign as seen by crappy mi myspace years ago. of course, he lost an awful lot of money on that. is he right? >> i don't think he's right. i'm not sure what he means by that. when he acquired myspace, mark was investing in the product. think never got to real names and real identity. they spent a lot of money on music licenses that others had. and when myspace and facebook were similar in size, mark never believed they were in the same business or community as myspace. maybe he has sour grapes. i don't know. >> well, at one point he thought it was worth $15 billion.
11:50am
we can remember that, too. yeah. exactly. >> yeah. >> well, that was a wild. he should have done it. good thing you didn't. >> exactly. >> some people say facebook face public too late. i'm curious, you bring us up to date on the possibility of an ipo for your company. >> well, you know, we don't talk about those things obviously. we look and most people out here look at ipos as a form of financing and so the company is well financed now and but if we choose to raise financing in the public markets are a better environments that are private we'll do that. it's just a stage and a form of financing if do you it, the goal is to help accelerate with wha a company can do faster. >> mark says he sees twitter the
11:51am
biggest competitor, another company that may go public perhaps as soon as the end of this year. you agree with that? >> yeah. i think a lot of these companies compete. i think twitter, facebook, google, all of them compete and you'll see smaller networks, video or photo networks compete for time attention and engagement but i think twitter has found a way to capture people's imagination on a large scale basis and do it a little bit more in context and a little bit more relevant so at the moment twitter seems like it's probably considered more of a competitor than other places but facebook is becoming a platform that powers a lot of things, similar to the way google's building its business. >> dan we have to leave it there as always, appreciate your time. >> thank you. >> you're welcome. straight ahead, mark zuckerberg's money, how much he's worth now that facebook has been public for a year. we'll be right back after this
11:52am
break. farmers presents: 15 seconds of smart. so you want to save on auto insurance? drive a hybrid. get good grades. lose the bling. go paperless. combine policies. make automatic payments. and of course, talk to farmers. hi ♪ we are farmers bum - pa - dum, bum - bum - bum - bum♪
11:53am
11:54am
it's appropriate the person with the biggest stake in facebook success is also the man that's driving it, ceo mark zuckerberg. robert frank is here with us as we head into the weekend with an assessment of how much he's lost and how much he still has. >> i should say from the outset we should not feel sorry for mark zuckerberg. he's 29, a billionaire. in the past year it's been a wild ride for his fortune.
11:55am
year ago when fb debuted his stake in the company was worth $19 billion, he was among the 40 richest people in the world at least on paper. that's the thing about paper. when the stock plunged so did his net worth to $9 billion, a loss of about $80 million a day. starts to add up, then the stock and his wealth started creeping back. today he has a stock fortune of about $13 billion. that puts him at a still respectable 74th richest man in the world. of course many smaller investors have truly suffered from fb's stock drop but zuckerberg's fortunes are closely tied to the company since he has sold very few shares. he sold around 30 million shares at the offering to pay taxes on an options exercise but he doesn't have a scheduled selling program like netflix and his charitable giving has been through stocks. zuckerberg will always be rich of course. the question of how rich will
11:56am
depend almost entirely where his facebook stock goes from here. >> he doesn't live a wealthy life. >> no. >> avertly extravagant life. >> for a guy who is so young he has been so mature about his wealth. he owns a $6 million house that he bought in 2011. he hasn't bought a yacht. >> basically like the projects. >> in silicon valley. >> what kind of car does he drive? a small honda or something. >> he hasn't done a yacht, he does have a private jet which they fly him around for security and time reasons but he has been se so low key, given a lot to charity, and he's been a terrific model citizen for wealth and he's so closely tied to the company's fortune, shareholders have to take comfort. >> thank you very much. >> a model citizen for wealth, i like that. >> and runs around in his private jet for security just like you, david. >> that's right, a private
11:57am
subway car. up next some of the stocks hitting new highs today. we'll be right back. big pictur. with the fidelity guided portfolio summary, you choose which accounts to track and use fidelity's analytics to spot trends, gain insights, and figure out what you want to do next. all in one place. i'm meredith stoddard and i helped create the fidelity guided portfolio summary. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account.
11:58am
11:59am
how a theme park operator went from bankruptcy to booming, "comeback companies" reports today on cnbc. all right, before we send it to "fast money halftime report" some financial stocks on the
12:00pm
move, ubs upgrading global banks from overweight to underweight. jpmorgan chase up just shy of 2%. citi up just 1.5%, wells fargo just greater than 1%. ubs said all of the banks will turn into net distributors of catch rather than net issuers. that does it for us today. >> indeed it does. >> that's all we've got for "squawk on the street". thanks to kayla for stepping in. simon see you money." fast money halftime report" right now. >> thanks. welcome to the halftime show. four hours until the close. look at where we stand on the street stocks up about 1% on the week and here's what we're following on the half. facebook one year later as the stock struggles to regain its ipo price we grade the performance of the boss. price to perfection, priceline up 30% ar